A new money lender that charges a 49.9% interest rate has been criticised by consumer rights watchdogs.

UK-based Amigo, which launched in Ireland on Monday, offers loans to people with poor credit histories.

The firm, which has 207,000 customers in the UK, is initially trialling its service in Ireland over the internet and phone.

Amigo offers loans of between €500 and €5,000 for a period between 12 and 36 months at a fixed APR of 49.9%.

It uses a model that requires friends and family to act as guarantor for the borrower, arguing this enables individuals who would not be able to access to credit to do so.

Amigo Loans logo
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Amigo said it tries to offer a better option to people with a poor credit history who would otherwise have to borrow from moneylenders charging more than 100% in interest.

But Demott Jewell of the Consumers’ Association of Ireland said money lending always hurts people, and he cannot see how high interest rates will help those who are already struggling to get out of debt. He added: “Money lending is always going to be a problem because the interest rate is an extra burden on people who are already struggling. From a starting point, it’s hurtful.

“I know this organisation is suggesting their rate is pitched and their business model is pitched so those who have a credit rating problem can ultimately escape from it.

“I do not see an iota of how that is feasible or realistic.”

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But Daniel Hawkins, managing director of Amigo Loans Ireland Ltd, insisted the lender works to help people with poor credit history get back on their feet.

He said: “We believe there is a need to make access to credit possible for ordinary people who have limited credit history on file, often through no fault of their own, and cannot get a loan from their bank or credit union.” Last November, news that Amigo Loans had received a money-lending licence from the Central Bank prompted criticism from opposition parties, and Taoiseach Leo Varadkar said the Government may need to consider a cap on lender rates, though this has not happened yet. The Insolvency Service of Ireland said debt can be crippling for many – but there are many options available for people experiencing issues.

A spokesman added: “When unpaid debt becomes such a burden it prevents you from getting out of bed in the morning, brings a sense of dread when answering the phone or opening the post, it is time to take control of the situation.”